J.P. Morgan expects HSBC
HBC, +0.50%
(5) to post $2.6 billion in net income attributable to shareholders, down from $7.7 billion in the year-earlier period. CLSA has estimated a profit of $2.3 billion, while Taifook Securities projected a profit of a just $152 million.

"The main culprit for this earnings plunge would be a $4.7 billion mark-to-market accounting loss on its cash flow or equity," Taifook analyst Paul Lee wrote in a report.

But he added: "The spotlight will again fall on further damages done by the U.S. subsidiary HSBC Finance, which we expect to report a pre-tax loss of some $4.5 billion on loan impairment charges of some $9 billion for the first six months of the year."

"Operations in Asia, particularly in Hong Kong and mainland China, will remain the bright spot within the group, despite narrower interest spreads and lackluster loan demand, given the absence of any major credit or investment losses," he said.

Other local banking stocks traded in Hong Kong were also mostly higher amid hopes that a recent pick-up in bank lending in the city could boost performance in coming months.

"We believe Hong Kong and Hong Kong banks face not just a relatively light non-performing loan cycle that is arguably now coming to an end... but a hard-to-match combination of low interest rates, return to good growth enhanced in large part by China linkages, likely capital inflows, and consequently a faster recovery in business/consumer confidence, labor markets and asset reflation," Goldman Sachs analysts wrote in a report released Monday.

Shares of Hang Seng Bank (11)
HSNGY, -1.03%
however, slipped 0.6% ahead of its own earnings results later in the day, as investors locked in profits after the stock gained in 13 of the previous 14 sessions. A Dow Jones Newswires poll of analysts estimates Hang Seng's profits to decline 23% to $7 billion Hong Kong dollars.

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